Séamus Grimes
Emeritus Professor of the University of Galway, Ireland
In 1968, he graduated from University College Dublin. In 1970, he received a Masters Degree from the University of Ulster. In 1979, he received his PhD from the University of New South Wales.
From 1980, he taught geography at the University of Galway and was also associated as a researcher in the university’s Whitaker Institute.
He taught for many years at the University of Galway, becoming an emeritus professor in 2015. He continues to be actively involved in research in the university’s Whitaker Institute. He has been involved in research collaboration with colleagues at East China Normal University in Shanghai for more than 10 years and has interviewed many foreign R&D centres in the city as part of his on-going research. He has published widely in international journals on topics in economic geography. His recent research focuses on the role of foreign technology companies in China and China’s integration into global value chains. In 2018, he co-authored with Yutao Sun ‘China and Global Value Chains’.
The subject of this current interview is related to his recent paper: Seamus Grimes and Debin Du (2022) China's emerging role in the global semiconductor value chain. Telecommunications Policy, 46(2), 101959
Participation of China and the US in the Global Semiconductor Value Chain
The last ten years witnessed the US’ return to a reliance on industrial policy, which ironically is more in keeping with the approach taken in China. Already Morris Chang of TSMC fame has pointed out the limitations of trying to attract companies like TSMC to establish fabs in the US because of a lack of comparative advantage in terms of costs and skills. It will take some years to get such fabs up and running and even then they are likely to contribute only a small part of the overall demand for leading-edge chips. The US CHIPS Act of 2022 will have some effect in encouraging companies like Intel and Micron, which have been hedging their bets on China to invest more in the US and reduce the dependence of the US on supply chains based in mainland China and also in Taiwan. What is likely, however, to make China’s own efforts to develop greater self-reliance in semiconductors more challenging are the sanctions which have been imposed on Huawei and SMIC which prevents them from accessing critical suppliers for developing leading-edge chips. Also considering the growing geopolitical tensions over Taiwan, it is likely that this will lead to a greater bifurcation of the semiconductor value chain. In the short-term, most companies will continue to seek to benefit from the existing global value chain despite its heavy reliance on China for its market and on TSMC for its superior foundry services. Unless there is a sudden escalation in geopolitical tensions, companies will try to continue for some years exploiting what is a highly optimised value chain, and will gradually begin to reconfigure supply chains to ensure alternative options. The CHIPS and Science Act will encourage this reconfiguration, but the benefits of the existing configuration will take some years to replace. Also the cost of reconfiguring the existing value chains will be huge.
Today, the world's major high-tech companies and key suppliers are heavily embedded in the current global value chain. All of these companies have operations in China and work closely with leading Chinese electronics companies like Huawei, Lenovo, Xiaomi, Oppo and OEMs like Foxconn and Pegatron. Apple continues to be very heavily reliant on their operations in China, but work much more closely with Taiwanese companies like Foxconn and Pegatron and the input from Chinese companies, while growing, continues to be modest. The close connection between these global lead companies and their critical suppliers will continue. While their preference would be to have alternative locations such as Vietnam involved in their overall value chains, the attractions of China in terms of scale, labour force skills and overall productivity are difficult to replicate elsewhere. Radical changes to strategies will only take place if geopolitical risks rise significantly. Policymakers are keenly aware of China's interdependent and unbalanced relationship with other countries, like the United States, in technology value chains, like semiconductors. They have also recognized that their future success will depend in part on their ability to advance in China's innovation market.
The semiconductor global value chain has been developed over time to suit the needs of global companies rather than their headquarter countries. However, countries still see a key position in the value chain as a geopolitical weapon. It is clear already how the US is weaponising these choke points to constrain China’s ability to progress its semiconductor sector. The US is also putting considerable pressure on South Korea, Japan and even European countries like the Netherlands not to supply Chinese companies with critical components for developing greater self-reliance. The US is already seeking to develop an alliance among its allies to redevelop the semiconductor value chain without Chinese inputs. What these countries have to put in the balance is the real possibility of losing China’s market, which would be a major problem in many cases. In the absence of a serious escalation of geopolitical tensions, companies are likely to find ways around restrictions being imposed on their business strategies. Most companies share the view that the current global value chain is the most optimised in terms of productivity and innovation and are very reluctant to be pressured into making radical changes for political reasons. They also appreciate that the current GVC allows leading US companies to have significant funding to maintain their dominant position in the upper segments of the semiconductor value chain.
2022.09.18
Contacter：Yaoyuan Fang
Interviewer：Yaoyuan Fang
Proofreader：Yixun Long
Editor：Wensi Liang
References:
https://www.linkedin.com/in/gaillimh1967/?originalSubdomain=ie https://www.researchgate.net/profile/Seamus-Grimes/2 https://www.sciencedirect.com/science/article/pii/S0308596120300513 https://www.routledge.com/China-and-Global-Value-Chains-Globalization-and-the-Information-and-Communications/Sun-Grimes/p/book/9780367374747
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